Free Trade Fair Trade

International trade is critical in addressing a lot of the world’s problems and I try to follow the news on it. Unfortunately in recent years most of the news has been bad, for Americans anyway. George W. Bush was the last president to negotiate a serious trade agreement, three of them actually, with South Korea, Panama, and Colombia, all signed in 2007 and all still pending approval. Congress and the administration may finally be ready to ratify them but a lot of time has been lost, despite a consensus among economists they will create thousands of jobs. In an economy where new jobs have been scarce as hens’ teeth it is disheartening there is not much else in the pipeline.

The Obama administration seems to have engaged in only one new initiative, the Trans Pacific Partnership, and it is not clear it is going anywhere. It is multi-lateral, with Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. If you are like me and think the more trade the better that’s good. It would be better still if another major economy like Japan were included but so far no. As always with trade talks there is a fair amount of opposition, from unions who routinely oppose trade deals for protectionist reasons, from environmentalists, some of whom would dismantle the industrial revolution if they could, from people who think the United States always gets the short end in these deals, and from fair trade advocates who think they tend to further disadvantage the poor, especially in third world countries or emerging economies.

It’s this last I would like to address, fair trade. The term needs some explanation. It is one of those phrases that has been co-opted from the language to mean something fairly specific and very different from its more general, accepted meaning. Sometimes it simply describes policies of a luxury goods manufacturer who restricts sales outlets to retailers who agree to charge a minimum price. Increasingly it refers to the charitable practice of paying higher than market prices for goods from disadvantaged producers. The idea is to see to it the producer is fairly compensated. At its best the practice can help break the cycle of poverty. Typically the producers and their goods are certified by a charity or Non-Governmental Organization to meet certain economic, environmental, and labor standards. The NGO organizes cooperatives, sets wages and prices, and provides services such as marketing, training, import/export management, and strategic planning. Some countries regulate the process. Some don’t. You can find the label on everything from oriental rugs to chocolate. I have a number of friends who look for it. My church serves fair trade coffee. The US Catholic Bishops have endorsed the practice. Catholic Relief Services operates a well regarded fair trade program.

I have mixed feelings about it. I understand and approve the sentiment. If it really does “break the cycle of poverty” then charity has led to justice. But if it keeps people mired in industries and jobs where they can never be competitive then that is an injustice, however well intended. I wish there were better oversight. I know who CRS is and trust them. But who are some of these other people claiming to be engaged in fair trade? It seems to me there is substantial potential for abuse. But mostly I worry that it is a trade barrier. If the concept is used to oppose trade, as it often is, then it works against the long term prosperity of us all. I am enough of a history student to know the enormous economic progress in so much of the world since WWII has been due in large part to expanding international trade. The world has become not just more prosperous but safer. Freer trade can be made more equitable. It is not in our best interest to see it stopped.

Green Madness

As the Solyndra scandal continues to unfold I’m beginning to think it may finally begin to bring some sanity to this quasi-religious push for green energy. If you haven’t been following it in the news, Solyndra is the solar panel maker that got a $500+ million government loan guarantee, used the money to build a huge new factory, and promptly filed for bankruptcy. Turns out it was costing them $6 a pop to build panels that were on the market for less than $2. It was obvious before they got the guarantee that their business plan wasn’t viable. At least it was obvious to any analyst who bothered to look.

Colossal waste has become a familiar theme in the green energy business. We pour billions into obscenely expensive technologies that don’t work, are known to be unreliable, and have undesirable economic and ecological side effects. Often justified as jobs creators, what few jobs materialize are either overseas or come with eye popping costs. Solyndra is just one spectacular example.

Another one that should be getting more attention is the Texas wind boondoggle. Texas has more wind generating capacity than any other state, a lot more. Our politicians have been falling all over themselves to promote it. Boone Pickens invested a fortune in it. Boone learned his lesson but taxpayers (and rate payers) continue to invest. Drive down I 45 toward Houston and you will see a steady stream of trucks hauling turbine blades north, all of them imported by ship from China, the same China where the $2 solar panels are made. But a funny thing happened. We had a brutally hot summer in Texas. Air conditioning demand peaked at levels dangerously near grid capacity. Where was the wind-generated electricity? It wasn’t. As happens in summer heat waves, the wind fell off. But we pay for it in our electric bills whether the turbines spin or not. And never mind that the things are killing off eagles, we’ve still got to build transmission lines to get the power to where it is needed when the turbines do spin.

Then there are the ethanol subsidies and mandates. Remember ethanol? It was the renewable fuel that would end our reliance on foreign oil and fossil fuels. This may be the worst of them all. I could write a book on all that’s wrong with it. It’s corrosive in engines and, as mandates increase, more and more of us will have to buy new automobiles we wouldn’t otherwise need, or foot major repair bills. It gets lousy mileage but that hasn’t stopped the little green men from forcing through increased mileage standards. We may actually be about to end the subsidies (I’m not holding my breath) but between still increasing mandates and sky high gasoline prices that probably won’t end the massive diversion of cropland to corn with it’s concomitant runoff into the dead zone at the mouth of the Mississippi. Two years ago people even began to notice ethanol was making the world hunger problem worse.

And so it goes. Everywhere you look in the modern environmental movement there is another bad idea and misplaced priority. But nowhere is it written that the crazies always have to get control. And there are some things we could do that make sense. Maryland seems to be making progress cleaning up the Chesapeake. Maybe we could start to do something about the dead zone, an environmental catastrophe in the gulf far far worse than any oil spill ever was.

Maybe we could even put a few people back to work, really. There are jobs going begging because companies can’t find people qualified to fill them. They come with career paths and benefit packages. They are opportunities for rewarding work over many years. They aren’t necessarily in new industries either. They are often in well understood fields like nursing, vehicle maintenance, even trucking and they don’t all require many years of training and experience to develop the needed skills. Our community colleges and trade schools know how to prepare people for them and it doesn’t cost hundreds of thousands of dollars per job. Why in heavens name aren’t we addressing this? There are even a few work force development programs that have proved effective. Let’s identify them and get the right people into them. A few more people buying homes and paying taxes would work wonders. But first we have to stop the madness.